Robust PPP Pipeline Supports Bullish Infrastructure Outlook

Four infrastructure projects have recently been approved by the Public-Private Partnership (PPP) Center's Project Development and Monitoring Facility Board (PDMF) for possible inclusion under the Philippine government's PPP programme. We believe this development underscores our view that there is strong growth potential in the Philippine infrastructure sector.

These four projects are located on the main island of Luzon and consist of roads, railways and gas pipeline projects ( see table). This approval from the PDMF means that funds can be channelled to these infrastructure projects for pre-construction activities such as documentation and feasibility studies. These studies are expected to take five to six months to complete, after which, their inclusion to the PPP programme will depend on approval from the Philippines National Economic & Development Authority, an independent cabinet-level agency of the Philippine government responsible for economic development and planning.

Philippines - Projects Under PPP Programme
Project Name Sector Value (US$mn) Status
*Not Listed In The PPP Center. Source: BMI, Philippines Public Private Partnership (PPP) Center (30 January 2013)
DaangHari - SLEX Link Road Roads 47 Awarded
PPP for School Infrastructure Project (Phase I) Social Infrastructure 389 Awarded
Mactan-Cebu International Airport Passenger Terminal Building (Phase I, II) Airport 420 Under Tender
LRT Line 1 South (Cavite) Extension and Operation & Maintenance (O&M) Rail 1,250 Under Tender
Automatic Fare Collection System Rail 43 Under Tender
NAIA Expressway Project (Phase II) Roads 380 Under Tender
NLEX-SLEX Connector Road Roads 505 Under Tender
CALA Expressway (Cavite and Laguna Side) Roads 1,510 Under Tender
Modernization of the Philippine Orthopaedic Center Social Infrastructure 136 Under Tender
PPP for School Infrastructure Project (Phase II) Social Infrastructure 425 Under Tender
O&M of Angat Hydro Electric Power Plant (AHEPP) Auxiliary Turbines 4 & 5 Water 28 Under Tender
Civil Registration System - Information Technology Project Phase II Commercial Construction na Awaiting Approval
Vaccine Self-Sufficiency Project Phase II Healthcare 11 Awaiting Approval
O&M of the Laguindingan Airport Airport 43 Planning
New Bohol (Panglao) Airport Airport 191 Planning
O&M of the Puerto Princesa Airport Airport na Planning
Establishment of Cold Chain Systems Covering Strategic Areas in the Philippines Commercial Construction 36 Planning
Grains Central Project Commercial Construction 10 Planning
Logistics Support on the Agri-Fishery Products Commercial Construction 9 Planning
Talisay City Plaza Complex Heritage Restoration and Redevelopment Project Commercial Construction na Planning
LRT Line 2 East Extension and O&M Rail 281 Planning
Rehabilitation of Quirino Highway Roads na Planning
Regional Prison Facilities through PPP Social Infrastructure na Planning
Integrated Transport System (ITS) Project Urban Transport na Planning
New Centennial Water Supply Source Project Water 596 Planning
EI Nido Solid and Liquid Waste Management Facility Water na Planning
Bulacan Bulk Water Supply Project Water na Planning
MRT Line 7 O&M* Rail na Initial Planning
Skyway Stage 3 Project* Roads na Initial Planning
Manila-Makati-Pasay-Paranaque Mass Transit System* Rail na Potential PPP
Philippine National Railways (PNR) North and South Lines Development and Extension* Rail na Potential PPP
Plaridel Bypass Toll Road Project* Roads na Potential PPP
Batangas-Manila Natural Gas Pipeline Project I (BatMan I)* Gas Pipeline 1,200 Potential PPP

We believe that this potential inclusion of new projects into the PPP programme highlights our view that there is strong growth potential in the Philippines' infrastructure sector. Should the four projects be included, this brings the total number of projects under the PPP programme to 33 at the time of writing, with around nine projects (mainly infrastructure) undergoing varying stages of the tendering process. Besides including core infrastructure projects into the PPP programme, the Philippines government is also thinking of adding 'social infrastructure projects' to the programme. According to GMA News, they include the construction of housing communities for 60,000 informal sector families in Metro Manila and restoration and redevelopment of heritage structures in Old Manila.

Financial closure for these projects could also be completed much sooner than expected as the Philippine government had formed the country's largest infrastructure fund in 2012 to increase financing available to the sector. The fund, known as the Philippine Investment Alliance for Infrastructure (PInAI), has been developed with the support of two multilateral financial institutions - the Asian Development Bank (ADB) and the International Finance Corporation (IFC), the private sector investment division of the World Bank - and this should make it easier to attract much-needed private and foreign capital to the PPP programme.

The ADB had already announced in August 2012 that it plans to invest in the PInAI, while the IFC is currently providing financial advice on the PPP programme. Besides the ADB, Dutch pension fund asset manager Algemene Pensioen Groe, Australian bank Macquire Group, and one of Philippines' state pension funds, the Government Service Insurance System (GSIS) are also investing in PInAI. Macquarie itself is planning to invest up to US$600mn to finance infrastructure projects under the government's PPP programme. Macquarie has said that it is eyeing the Light Rail Transit 1 extension to Cavite from Baclaran, the Mactan-Cebu International Airport, and the Ninoy Aquino International Airport (NAIA) Expressway project for financing.

Boosted By PPP
Philippines - Infrastructure Industry Value Forecasts

This strong potential for growth in the Philippines' infrastructure sector is therefore reflected in our forecasts, with real growth for the infrastructure sector forecast to reach 5.9% per annum between 2013 and 2017. To be sure, this strong growth potential is already attracting a high level of interest from the private sector, indicating to us that investors are convinced that Manila can deliver the PPP projects as promised ( see our online service, September 20 2012, 'High PPP Interest Suggests Investors Ready To Believe'). At least 13 parties have signalled their interest in bidding for the NAIA Expressway Project road project and there has also been significant interest for several of the other PPP projects under tender ( see table).

Philippines - Interested Bidders For Selected Projects Under PPP Programme
Mactan-Cebu International Airport Passenger Terminal Building (Phase I, II) Airport At least 4
Source: BMI
LRT Line 1 South (Cavite) Extension and Operation & Maintenance (O&M) Rail At least 30
NAIA Expressway Project (Phase II) Roads At least 13
Modernization of the Philippine Orthopaedic Center Social Infrastructure At least 9
O&M of Angat Hydro Electric Power Plant (AHEPP) Auxiliary Turbines 4 & 5 Water At least 10
This article is tagged to:
Sector: Infrastructure
Geography: Philippines, Philippines, Philippines, Philippines

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